Hedging Bets Through Added Value

The word “maybe” is exciting for farmers who enjoy thinking outside the conventional field.

Keith and Brian Gelder, Jewell, IA, have invested four years honing a livestock venture concept using DDGS and improved feed conversion efficiency. But surprise, their “livestock” are shrimp.

“Starting a value-added business represents a different way of thinking for most farmers,” Keith Gelder says. “The university I attended in the 1970s was all about production. Most farmers like driving big equipment. By contrast, this venture starts with marketing and figuring out why consumers buy the shrimp they do.”

Gelder farms 400 acres of corn and soybeans in north-central Iowa. Since health concerns forced him to quit hog production, he emphasizes diversifying his farm operation with value-added enterprises.

This type of thinking outside the norm is a hallmark of value-added businesses launched through Ag Ventures Alliance, a Mason City, IA, ag business development incubator (www.AgVenturesAlliance.com).

Ag Ventures itself was a new idea 10 years ago. “A group of farmers and I wanted to start a business that launched value-added businesses,” explains Ag Ventures Executive Director Don Hofstrand. The group studied agricultural value-added businesses and noted what had helped to establish and nurture them.

“The leadership for starting a business has to come from farmers and not me to be successful,” Hofstrand says. “In a sense, Ag Ventures Alliance is an educational organization where farm entrepreneurs learn by doing.” Ag Ventures members with new business ideas can use its initial financial assistance, large-scale fund-raising capabilities and business contacts. There is no full-time staff, but contracts for Hofstrand's time from the Iowa State University (ISU) Extension Service, where he is value-added ag specialist, co-director of the Iowa Ag Marketing Resource Center (www.agmrc.org) and the founder of the Ag Decision-Maker Web site (www.extension.iastate.edu/agdm/).

“Ag Ventures locates expertise to help serial entrepreneurs overcome their lack of experience,” Hofstrand says. “People don't bring their ideas to Ag Ventures and have us ‘do it,’ but we can help them launch a new businesses themselves. They invest their time, and the eventual reward is ownership in a new company.

“The primary value of Ag Ventures Alliance is not just the businesses we help to start, it's the development of our members' business and entrepreneurial skills,” says Hofstrand.

“If your new business thrives you can make money, but if it fails there is no bailout from Ag Ventures. As an organization, we receive no public funding.” Organized as a cooperative, Ag Ventures' 1,100 members pay a one-time membership fee for the option of participating in emerging business ventures…or not.

“We are a private company with 20 directors,” Hofstrand says. “If there is an idea for a business, they start to investigate that idea. Ag Ventures can provide financial help and expertise. If it fizzles, they don't owe Ag Ventures any money, but if it thrives, the founders owe Ag Ventures a multiple of the original amount used. Ag Ventures does not own or control value-added businesses, although it has a minority ownership in many of those it starts or works with.”

The Aquaculture Venture illustrates how Ag Ventures helps a new business idea develop and grow.

After farming for 30 years, Keith Gelder looks forward to adding value to his crops with shrimp farming. As co-chair of the Ag Ventures Aquaculture Committee along with his son Brian, Gelder has spent the last four years pursuing a domestic shrimp-production facility. Ag Ventures' contacts helped to write and secure a USDA Value-Added Producer grant and feasibility study. The concept originally grew out of a desire to use waste heat from an ethanol plant, and to add value to farmers' DDGS.

Four years of research found top priorities to be consumer shrimp preferences, a skilled aquaculture workforce and a warm GulfCoast climate, Gelder says.

Brian Gelder, an ag engineer postdoctoral student at ISU, adapted a South Carolina DNR-designed “raceway” system. The self-contained oval produces shrimp more competitively and sustainably than conventional shrimp ponds, he says. The raceway design recycles water, and supplants 20-30% of a fishmeal ration with DDGS, based on ISU research.

The Ag Ventures Aquaculture Committee has developed a business plan and negotiated a potential partnership with an experienced Alabama shrimp producer. He, in turn, will tap into the raceway system and the marketing ideas of the Iowa-based Ag Ventures Aquaculture subsidiary.

“The project has evolved slowly, and there will be bumps in the road as we adapt the design and develop our markets,” Gelder says. “We're waiting on the legal and fundraising details.”

Ag Ventures' experience with stock offerings and capitalizing new businesses is key to its next step. Past Ag Ventures enterprises have been funded by many small investors rather than fewer larger ones through public stock offerings.

“Our intent is to create opportunity for our membership and bring in new members who want to diversify their investments,” Gelder says.

The shrimp venture is but one of several being investigated by Ag Ventures Alliance. Wind-based energy generation has been studied, but the existing rate structure makes it a challenging market to enter. “Maybe there's a way to aggregate large numbers of farmers with small farm turbines to make it affordable,” Gelder muses.

Imagine driving down Iowa's Interstate-35 and seeing 85 sunflower-shaped solar collectors, a field of wind turbines and a space-station-looking ring of light. Is it Roswell, NM? No, it is the future Swaledale BioVillage.

Four years ago, the tiny burg of Swaledale, IA, population 173, approached Ag Ventures Alliance for help brainstorming a tourist attraction that would also serve its daily grocery and commercial needs.

“When you drive down the highway, you won't have seen anything like it before,” says Bob Cole, a retired Extension community and economic development specialist and Ag Ventures BioVillage project leader. “The colossal wind turbines and solar collectors will catch your eye initially.”

There will also be a circle of shops featuring locally produced foods. A state-certified community kitchen will enable neighbors to produce jellies, salsas, cookies and related foods that meet government sanitation standards for retail sales.

Another display will feature sustainably made products, such as benches made from recycled milk jugs.

There will be a lake, ponds, waterfalls, bio-gardens, hildren's play area, theater and natural mazes of corn, soybeans and native grasses. An adjacent gas biofuels station will have a roofscape of trees and gardens.

Motorists will have their choice of every biofuel blend available.

It's hoped that Swaledale's population density will increase, with sustainably designed condos and duplexes near the BioVillage.

The BioVillage will be powered by wind turbines and solar power. As such, the BioVillage will serve as an exemplary model of a futuristic, environmentally friendly sustainable community.